This test was done on BI but if I recall it right I have never had any problems with mercenaries in 1.2.But it seem BI is different in that respect.Of course I might have been doing something wrong but could not for example assign merc equites veteranii (for testing purpose) to any other faction then ERE WRE (rebels included) or Slaves

Perhaps the problem is the limit in recruitable units for custom battles, when you enable slaves for them. Did you mean that ?
It could be... I really don't know...I could see unit's icon in pre battle menu,could select it and when loading black screen crash.Regardless wheter unit was assign to Slaves or any other faction.Campaign map was pretty much the same...everything going ok until loading battle.Then I started removing some units from Slaves (In my view there is no need for so many of them anyway) and things began to work